Iraq Oil Law: In Whose Interest? 8 May 2007
noimage Raed Jarrar, Electronic Iraq


8 May 2007

A draft of a new oil law is working its way through Iraq's parliamentary process. An earlier draft, in English, was leaked in mid-2006, shocking a number of specialists. Among them was Erik Leaver of the institute for Policy Studies, who spotted language matching exactly that of a previously leaked seminar paper produced by a private contracting company called Bearing Point.

The architects of a new Iraq oil law aim to privatize Iraq's oil and open the doors for American companies to sign long term contracts controlling Iraq's oil resources and infrastructure, which is in violation of existing US legislation (No: 109-234) which stipulates that "no funds...may be made available to establish permanent United States military bases in Iraq or to exercise control by the United States over the oil infrastructure or oil resources of Iraq."

Passing a new oil law is not an urgent item on Iraq's agenda. Despite this, a new law is being prepared by the Iraqi separatist leaders, the Bush Administration, US oil companies, and the IMF.

US contractors such as Bearing Point have been working with the US State Department to draft the law and the State Department has been pushing for the privatization of Iraq's oil in plans dating back as far as 2002.

More than 60 Iraqi experts and officials signed a petition against the new oil law in March 2007. One member of the Iraqi parliament participating in the Amman-Jordan conference said, "This law must be rejected as whole, there is no way it can be enhanced or fixed." Many Iraqis and Iraqi parliamentarians agree.

Another conference held in Dubai-UAE last month, organized by the Iraqi parliament, included many Iraqi experts and parliamentarians. The majority of the participants thought the law should not be passed for three
major reasons:

1. Iraq's unity:

The law threatens Iraqi unity by decentralizing the major authorities related to petroleum operations. Many Iraqis view the law as a sort of Iraq separation fund.

Many observers say that Iraqi separatist leaders - Sunnis and Shias and Kurds - are using this law to implement their separatist agenda. They want to split Iraq into three or more sectarian/ethnic regions. Iraqi nationalist leaders are fighting against the law because they think this is the most dangerous thing that could happen. Iraqi nationalists - Sunnis and Shias and Kurds - believe in a unified Iraq with a central government that controls natural resources.

2. Iraq's sovereignty:

The law undermines Iraq's sovereignty in three ways. First, the Iraqi government cannot control the oil production limits, the action that will stop Iraq's relationship with OPEC.

Second, the law does not recognize the Iraqi judicial system as an authority for
resolving disputes.

Third, foreign oil companies are represented on the board of the Iraqi Federal Oil and Gas Council. It is unprecedented in Iraq's history that representatives of foreign oil companies sit on its federal oil and gas council approving their own contracts and deciding where oil revenue should be distributed. Two-thirds of the attending members of the Federal oil and Gas Council can approve any contract even if the terms of that contract contradict existing laws.

3. Financial losses:

In addition to the main points mentioned above, Iraq will lose hundreds of billions of dollars to foreign oil companies during the next 35 years because the law doesn't give any preferences to local companies due to the unconventional type of contracting this law legalizes called the Production sharing agreements or the exploration and production agreements. Iraqi leaders in general, separatists or nationalists, don't mind dealing with foreign companies, but many Iraqis are against signing unfair long-term contracts with foreign or local companies.

According to the new oil law, the foreign oil companies will have exclusive rights to produce oil from certain fields. They do not have to do any work during the first 10 years, which is called the "exploration period" in the law. This 10 year period is very convenient for foreign oil companies as they won't be obligated to do any work while Iraq is violent and unstable, but at the same time they will make sure that no one else will drill their oil fields or produce Iraqi oil form them for the next 10 years. When foreign oil companies think the time is appropriate to start working, they can produce oil for up to 25 years with huge profits because they own a certain percent of the oil. Other oil-rich Middle Eastern countries never agree to these types of contracts. Instead, they hire foreign companies under technical services agreements that do not privatize the oil and give a flat rate to foreign companies.

It's only in the interest of the Bush administration, the international oil companies, the International Monetary Fund and World Bank, and the Iraqi separatist leaders to pass this oil law. The new oil law is a direct intervention in Iraq's domestic policies. It will result in nothing more than increasing Iraqi-Iraqi violence and the anti-occupation struggle. The best oil law is a law that the Iraqis choose after the last US soldier leaves. The best and only policy that will end the violence in Iraq is setting a timetable that will end all the US presence in Iraq completely, without permanent bases, and will give Iraqis the time and space to heal their wounds and govern themselves.

Raed Jarrar is Iraq Consultant for the American Friend Service Committee's Middle East Peacebuilding Program.